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The Determinants of Growth for Small and Medium Sized Firms: The Role of the Availability of External Finance

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Author Info
 Becchetti, Leonardo
Trovato, Giovanni

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Abstract

We present an empirical analysis of the determinants of growth for a sample of Italian small and medium sized firms. We show that, when investigating a sample which includes firms between 10 and 50 employees and a set of variables larger than those usually considered in the literature, growth--net of industry characteristics and ex ante market power--turns out to be significantly affected not only by size and age, but also by state subsidies, export capacity and credit rationing. By adopting a multivariate approach we also show that these findings are confirmed after controlling for heteroskedasticity, survivorship bias and serial correlation. Our results suggest that the hypothesis of independence of firm growth from the initial size and other factors (usually referred to as Gibrat's law in the literature) is not rejected for large firms, while it does not hold for small and medium sized firms under financial constraints in a "bank-oriented" financial system in which access to external finance is difficult. Copyright 2002 by Kluwer Academic Publishers

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Publisher Info
Article provided by Springer in its journal Small Business Economics.

Volume (Year): 19 (2002)
Issue (Month): 4 (December)
Pages: 291-306
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Handle: RePEc:kap:sbusec:v:19:y:2002:i:4:p:291-306

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References listed on IDEAS
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gerrit de Wit & Haibo Zhou, 2009. "Determinants and dimensions of firm growth," Scales Research Reports H200903, EIM Business and Policy Research. [Downloadable!]
  2. Patrick Musso & Stefano Schiavo, 2008. "The impact of financial constraints on firm survival and growth," Journal of Evolutionary Economics, Springer, vol. 18(2), pages 135-149, April. [Downloadable!] (restricted)
    Other versions:
  3. Chiara Coluzzi & Annalisa Ferrando & Carmen Martinez-Carrascal, 2009. "Financing obstacles and growth - an analysis for euro area non-financial corporations," Working Paper Series 997, European Central Bank. [Downloadable!]
  4. Giorgio Fagiolo & Alessandra Luzzi, 2004. "Do Liquidity Constraints Matter in Explaining Firm Size and Growth? Some Evidence from the Italian Manufacturing Industry," LEM Papers Series 2004/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
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  5. Raquel Ortega-Argilés & Rosina Moreno, 2005. "Firm Competitive Strategies And The Likelihood Of Survival - The Spanish Case," ERSA conference papers ersa05p347, European Regional Science Association. [Downloadable!]
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  6. Yuji Honjo & Nobuyuki Harada, 2006. "SME Policy, Financial Structure and Firm Growth: Evidence From Japan," Small Business Economics, Springer, vol. 27(4), pages 289-300, December. [Downloadable!] (restricted)
  7. Reuer, Jeffrey J. & Ariño, Africa & Mellewight, Thomas, 2003. "Entrepreneurial alliances as contractual forms," IESE Research Papers D/527, IESE Business School. [Downloadable!]
  8. Cécile Carpentier & Jean-Marc Suret, 2009. "Entrepreneurial Equity Financing and Securities Regulation: An Empirical Analysis," CIRANO Working Papers 2009s-10, CIRANO. [Downloadable!]
  9. Francisco Diaz Hermelo & Roberto Vassolo, 2007. "The Determinants Of Firm’S Growth: An Empirical Examination," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 10(1), pages 3-20. [Downloadable!]
  10. Salvatore Zecchini & Marco Ventura, 2006. "Public Credit Guarantees and SME Finance," ISAE Working Papers 73, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
  11. Blandina Oliveira & Adelino Fortunato, 2005. "Firm Growth and Liquidity Constraints: A Dynamic Analysis," GEMF Working Papers 2005-07, GEMF - Faculdade de Economia, Universidade de Coimbra. [Downloadable!]
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  12. Jae Kang & Almas Heshmati, 2008. "Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea," Small Business Economics, Springer, vol. 31(4), pages 445-462, December. [Downloadable!] (restricted)
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  13. Chiara Coluzzi & Annalisa Ferrando & Carmen Martínez-Carrascal, 2009. "Financing obstacles and growth: An analysis for euro area non-financial corporations," Banco de España Working Papers 0836, Banco de España. [Downloadable!]
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    [Repercussions of firm size definition on empirical results for firm efficiency     ," MPRA Paper 4731, University Library of Munich, Germany, revised 05 Sep 2007. [Downloadable!]
  17. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2008. "Financial constraints as a barrier to export participation," Documents de Travail de l'OFCE 2008-29, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  18. Francesca Gagliardi, 2009. "Financial development and the growth of cooperative firms," Small Business Economics, Springer, vol. 32(4), pages 439-464, April. [Downloadable!] (restricted)
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